The Cambodian National Tax Authority recently announced that, with the two-year grace period coming to an end, all casinos within the country will officially start paying Value Added Tax (VAT) and Minimum Tax from January 1, 2025, marking a significant adjustment in Cambodia's gambling industry tax policy.
According to the ministerial order signed by Deputy Prime Minister and Minister of Economy and Finance Aun Pornmoniroth in December 2022, casinos are required to file and pay taxes monthly, with VAT levied at 10% of gross gaming revenue and a minimum tax rate of 1%. The policy was originally set to be implemented in 2023, but due to the impact of the COVID-19 pandemic on the industry, the government extended the grace period to the end of 2024 at the request of the industry.
This new tax policy is an important measure for Cambodia to improve the regulatory system of the gambling industry. According to the 2020 Gambling Law, casinos are already required to pay gambling taxes to the Commercial Gambling Management Commission, with a tax rate of 7% for VIP room operations and 4% for other gambling projects.
With the upcoming implementation of VAT, the overall tax burden for some casinos will climb to 17%, causing widespread concern in the industry. For example, the Australian company Donaco, which operates the DNA Star Vegas casino in Poipet on the Thai-Cambodian border, has urgently hired tax consultants to clarify tax obligations and stated that non-compliance could lead to back taxes and fines.
The push for tax reform by the Cambodian government is backed by the country's increasingly severe fiscal situation. According to the latest report from the Asian Development Bank, affected by a decline in tax revenue, increases in civil servant salaries, and rising social security expenditures, Cambodia's fiscal deficit is expected to reach $1.5 billion in 2024 (3% of GDP), significantly up from $900 million in 2023 (1.9% of GDP). Government revenue is also projected to decrease from $6.9 billion in 2023 to $6.6 billion in 2024, forcing the authorities to launch a tax mobilization strategy for 2025-2028, aiming to enhance tax efficiency through modernization of tax administration.
It is noteworthy that even after the implementation of VAT, Cambodia's gambling industry's baseline tax rates of 4%-7% remain competitive in Asia. In comparison, Macau's gambling tax is as high as 40%, Singapore's ranges from 8%-18%, the Philippines' POGO tax rate is 5% and VIP business 15%, and the average tax rate in Australian states is about 25%. Analysts point out that the industry may face initial adaptation pains with the new policy, but in the long term, it will help regulate market order and create a stable source of tax revenue for the government. As the grace period counts down, casinos are intensifying adjustments to their financial systems to meet the upcoming tax compliance challenges.
